Featured Product

    Andreas Dombret of Bundesbank Speaks About the Future of Europe

    February 26, 2018

    Andreas Dombret, Member of the Executive Board of the Deutsche Bundesbank, spoke at the European School for Management and Technology about the future of Europe and of the euro area in particular. He highlighted that the euro area is witnessing a full-fledged economic upswing. However, banks in several member states are still saddled with huge volumes of non-performing loans while some member states are still vulnerable due to high levels of public debt. He emphasized the need to overcome such weaknesses in the financial architecture in the euro area.

    Mr. Dombret stated that the financial architecture in the euro area still has weaknesses, even after years of recovery and various far-reaching reforms. As far as the Banking Union is concerned, the debate has centered on the European Deposit Insurance Scheme (EDIS), which should be the third and final pillar of Banking Union. In this regard, the milestones concern realigning the European resolution framework and its national counterparts, and banks building up bail-in-able capital to meet their Minimum Requirement for own funds and Eligible Liabilities (MRELtargets. He said: "Maintaining reform pressure and reducing risks before establishing a common safety net certainly extends beyond eliminating the current privileges for sovereign bonds in banking regulation. It pertains to all excessive risks currently identified in national banking systems. These remarks do not mean that I am dead set against a reform of deposit insurance. I am talking about putting the reforms in the right sequence. So my first point is that if we want to improve the structural design of the euro area, we need to address the sovereign-bank nexus—amongst other things—before we create a European deposit insurance scheme." Therefore, addressing sovereign concentration risks on banks' balance sheets should be a top priority in further reforming the euro area financial architecture. He proposed to rectify an imperfect financial architecture, which he believes is not an easy task. 

    Mr. Dombret believes that European supervisors should not hesitate to vigorously pursue the issue of non-performing loans, or NPLs. He acknowledged the considerable progress being made by banks in cleaning up their balance sheets in 2017—not only because mounting supervisory pressure forced them to do so, but also because the improvement in asset quality creates long-term value for their stakeholders. He added that "... let us not dwell on supposed European conflicts of interest surrounding the treatment of NPLs. I propose that we see this as a conflict between short-term and long-term regional interests. Therefore, I strongly support the take of European supervisors on this matter." He then highlighted that resilience is not a state, but a process. From the viewpoint of a banking supervisor, even though a lot of the daily work is centered on capital requirements, cyber risks and other IT-related risks are quite special; this is because even adequate capitalization in banking systems does not prevent IT-related financial stability issues from occurring (such as downtimes in payment systems). Thus, financial supervisors need to target those risks in a direct way, pushing the financial sector to make incidents less likely and emergency responses as effective as possible. He concluded by highlighting the advantages of European cooperation and providing citizens with the tools they need to understand and classify issues around Europe.

     

    Related Link: Speech

    Keywords: Europe, Banking, NPL, MREL, EDIS, Financial Architecture, Financial Stability, Bundesbank, BCBS

    Related Articles
    News

    APRA Updates Validation and Derivation Rules in September 2020

    APRA updated the lists of the Direct to APRA (D2A) validation and derivation rules for authorized deposit-taking institutions, insurers, and superannuation entities.

    September 24, 2020 WebPage Regulatory News
    News

    EC Proposes Frameworks for Crypto-Assets and Operational Resilience

    EC adopted a package that includes the digital finance and retail payments strategies and the legislative proposals for regulatory frameworks on crypto-assets and digital operational resilience.

    September 24, 2020 WebPage Regulatory News
    News

    ECB Publishes Opinion on Proposals to Amend Securitization Framework

    ECB published an opinion (CON/2020/22) on proposals for regulations amending the securitization framework of EU, in response to the COVID-19 pandemic.

    September 24, 2020 WebPage Regulatory News
    News

    FCA Consults on Regulation of International Firms in UK

    FCA is consulting on its approach to the authorization and supervision of international firms operating in UK.

    September 23, 2020 WebPage Regulatory News
    News

    MAS Amends Notice on Capital Adequacy Requirements of Banks

    MAS published amendments to Notice 637 on the risk-based capital adequacy requirements for reporting banks incorporated in Singapore.

    September 23, 2020 WebPage Regulatory News
    News

    FCA to Begin to Move Firms to New Data Collection Platform RegData

    FCA announced that it will move firms to RegData from Gabriel in the coming months in stages, based on the reporting requirements of firms.

    September 23, 2020 WebPage Regulatory News
    News

    ISDA Expects IBOR Fallbacks to be Effective by End of January 2021

    ISDA issued a letter to regulators to flag that it now expects the supplement to the 2006 ISDA Definitions and the Interbank Offered Rate (IBOR) Fallbacks Protocol to be effective around mid- to late-January 2021.

    September 23, 2020 WebPage Regulatory News
    News

    APRA Reviews Repayment Deferral Plans, Identifies Best Practices

    APRA has concluded its review of the comprehensive plans of authorized deposit-taking institutions for the assessment and management of loans with repayment deferrals.

    September 22, 2020 WebPage Regulatory News
    News

    ESAs Assess Risks to Financial Sector After COVID-19 Outbreak

    ESAs (EBA, EIOPA, and ESMA) published the first joint report that assesses risks in the financial sector since the outbreak of the COVID-19 pandemic.

    September 22, 2020 WebPage Regulatory News
    News

    BoE Confirms Withdrawal of COVID Corporate Financing Facility

    BoE and HM Treasury confirmed that the COVID Corporate Financing Facility (CCFF) will close for new purchases of commercial paper, with effect from March 23, 2021.

    September 22, 2020 WebPage Regulatory News
    RESULTS 1 - 10 OF 5836